Question 1

The doctrine of ultra vires is of more significance today than it has been in the past.

Accepted Answer

A) True 
 B)False  False

Question 2

Zeron Corporation is incorporated in the state of West Virginia.It now wants to open a retail outlet in Kentucky.Zeron must obtain a certificate qualifying it to do business in the state of Kentucky.

Accepted Answer

A) True 
 B)False  True

Question 3

Mark complied with all formation requirements for incorporating his taxicab business.He is the sole shareholder in the corporation.The corporation owns two automobiles that Mark frequently uses for his own personal use.In addition,he sometimes deposits the money he takes in during the day into his personal checking account.One day,an employee of the company,while driving one of the company vehicles,accidentally hits a pedestrian in a crosswalk.The pedestrian sues both Mark and the taxi company for $100,000.The corporate assets are only $32,000.Is the corporation liable for the acts of its employee? Will Mark be personally liable under the facts?

Accepted Answer

Since the formalities of creating a corporation have been strictly complied with,there is no question that this is a de jure corporation.However,the corporate veil may be pierced and limited liability disregarded where the business has not been conducted in a corporate manner.Here,Mark is acting as though the cars and income are for his own personal use,and the courts are likely to require that he personally pay the injured party.Also,the corporation bears liability under respondeat superior for Mark's tort because it was committed in the course of his employment.

Question 4

Which of the following is the basic governing document of a corporation?

Accepted Answer

A) A subscription. 
B) A charter, after filing. 
C) The set of bylaws. 
D) A certificate of authority. 
A) A subscription. 
B) A charter, after filing. 
C) The set of bylaws. 
D) A certificate of authority.

Question 5

The "corporate veil" is most likely to be pierced in the case of closely held corporations and in parent-subsidiary relationships.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT a characteristic of the corporate form of doing business?

Accepted Answer

A) Limited liability. 
B) Perpetual existence. 
C) Informal organization. 
D) Transferability of corporate shares. 
A) Limited liability. 
B) Perpetual existence. 
C) Informal organization. 
D) Transferability of corporate shares.

Question 7

The Statutory Close Corporation Supplement to the Model and Revised Acts applies only to corporations having fewer than 100 shareholders that elect statutory close corporation status.

Accepted Answer

A) True 
 B)False

Question 8

What are the consequences of a defective incorporation?

Accepted Answer

The possible consequences of a defective

Question 9

Promoters have a fiduciary relationship with the corporation.

Accepted Answer

A) True 
 B)False

Question 10

The incorporators would typically do which of the following?

Accepted Answer

A) Purchase the outstanding shares. 
B) Assemble the assets. 
C) Sign the charter. 
D) Prepare the incorporation papers. 
A) Purchase the outstanding shares. 
B) Assemble the assets. 
C) Sign the charter. 
D) Prepare the incorporation papers.

Question 11

Bylaws are rules governing a corporation's internal management.

Accepted Answer

A) True 
 B)False

Question 12

Under the Revised Act,a corporation can act as an incorporator of another corporation.

Accepted Answer

A) True 
 B)False

Question 13

All of the following are characteristics of a corporation EXCEPT:

Accepted Answer

A) it has perpetual existence. 
B) it is a legal entity of its own. 
C) it is able to be sued and to sue. 
D) it is usually managed by its shareholders. 
A) it has perpetual existence. 
B) it is a legal entity of its own. 
C) it is able to be sued and to sue. 
D) it is usually managed by its shareholders.

Question 14

A corporation is a domestic corporation in the state in which it is incorporated.

Accepted Answer

A) True 
 B)False

Question 15

Under Subchapter S of the Internal Revenue Code,a corporation's income is taxed only at the shareholder level.

Accepted Answer

A) True 
 B)False

Question 16

A corporation is considered to be a person within the meaning of the Fifth Amendment protection against self-incrimination.

Accepted Answer

A) True 
 B)False

Question 17

The RMBCA has been adopted,in whole or in part,by most states.

Accepted Answer

A) True 
 B)False

Question 18

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is correct regarding a foreign corporation?

Accepted Answer

A) A foreign corporation is incorporated in a foreign country. 
B) Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. 
C) A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority. 
D) All of the above are correct. 
A) A foreign corporation is incorporated in a foreign country. 
B) Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. 
C) A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority. 
D) All of the above are correct.

Question 20

Under the RMBCA,a newly formed corporation need not hold an organizational meeting.

Accepted Answer

A) True 
 B)False

Exam 33: Nature and Formation of Corporations

The doctrine of ultra vires is of more significance today than it has been in the past.

Zeron Corporation is incorporated in the state of West Virginia.It now wants to open a retail outlet in Kentucky.Zeron must obtain a certificate qualifying it to do business in the state of Kentucky.

Which of the following is the basic governing document of a corporation?

The "corporate veil" is most likely to be pierced in the case of closely held corporations and in parent-subsidiary relationships.

Which of the following is NOT a characteristic of the corporate form of doing business?

The Statutory Close Corporation Supplement to the Model and Revised Acts applies only to corporations having fewer than 100 shareholders that elect statutory close corporation status.

What are the consequences of a defective incorporation?

Promoters have a fiduciary relationship with the corporation.

The incorporators would typically do which of the following?

Bylaws are rules governing a corporation's internal management.

Under the Revised Act,a corporation can act as an incorporator of another corporation.

All of the following are characteristics of a corporation EXCEPT:

A corporation is a domestic corporation in the state in which it is incorporated.

Under Subchapter S of the Internal Revenue Code,a corporation's income is taxed only at the shareholder level.

A corporation is considered to be a person within the meaning of the Fifth Amendment protection against self-incrimination.

The RMBCA has been adopted,in whole or in part,by most states.

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

Which of the following is correct regarding a foreign corporation?

Under the RMBCA,a newly formed corporation need not hold an organizational meeting.

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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